RSI Divergence (GOLD) Trading Strategy — Transcript

Full transcript

1. 0:00Everyone on the internet seems to be
2. 0:01teaching the RSI wrong. They tell you to
3. 0:04sell when it's overbought and they tell
4. 0:06you to buy when it's oversold. And
5. 0:08that's exactly how you lose every single
6. 0:11trade and get massively wrecked. Let me
7. 0:14show you my secret sauce. A simple way
8. 0:17to trade RSI divergences that actually
9. 0:20works. Loku Montana, this video is for
10. 0:23you. And for those of you that don't
11. 0:24know, every single week I make a
12. 0:26personalized video response to one of
13. 0:28your questions from the comments of the
14. 0:30previous video. Loku asked, "Can you
15. 0:31make a video on RSI divergence reversal
16. 0:34and short short pullback positions?"
17. 0:36Absolutely, bro. Let's get into it. The
18. 0:38RSI is not about spotting tops and
19. 0:41bottoms. It's a momentum indicator. It
20. 0:44tells you how strong the current trend
21. 0:46is. Here you can see the RSI line. And
22. 0:49if you look closely, you can see that
23. 0:51the typical range is between 70 on the
24. 0:54high level and 30 on the low level. The
25. 0:56RSI, also known as the relative strength
26. 1:00index, firstly measures momentum and not
27. 1:04direction. On the higher side, 70 means
28. 1:07that price is overbought. On the lower
29. 1:10end, 30 means the price is oversold. But
30. 1:14this does not mean that it is confined
31. 1:17to these two ranges. it can go outside
32. 1:19of them. The RSI is also for trend
33. 1:23strength, not entry timing, unless you
34. 1:26know the secret sauce. When the RSI
35. 1:28breaks above 70, the asset is very
36. 1:32strong, but that doesn't mean it's going
37. 1:34to reverse yet. The same goes when it
38. 1:37falls below 30. Just because it's
39. 1:40oversold doesn't mean it's time to buy.
40. 1:43Divergences happen when price makes a
41. 1:46new high but the RSI makes a lower high
42. 1:50or the opposite on the bottom. Price
43. 1:52makes a new low but the RSI makes a
44. 1:56higher low. Here is an example of a
45. 1:58bearish divergence where price goes up
46. 2:01and RSI goes down. And here is an
47. 2:04example of a bullish divergence where
48. 2:06price goes down and RSI goes up. Key
49. 2:09things to keep in mind here when
50. 2:11spotting divergences is that the price
51. 2:14and the RSI are out of sync. They are
52. 2:17divergent to each other. This is a sign
53. 2:20of trend weakness. It doesn't mean
54. 2:23reversal yet, just caution. This is a
55. 2:26great warning, but it is not your entry.
56. 2:29And that's where my secret sauce comes
57. 2:32in. Here's what I do. I wait for the RSI
58. 2:35to leave the 7030 zone. Then I wait for
59. 2:38it to come back inside that zone. That's
60. 2:42the moment where the momentum flips and
61. 2:45that's where I look for entries. Now
62. 2:48let's see a real life example of how
63. 2:50this looks on the charts and it is way
64. 2:53more simple than you think. This is gold
65. 2:56US dollar on the 15-minute time frame.
66. 2:58This right here is the price. This right
67. 3:00here is the RSI. To find the RSI, all
68. 3:03you need to do is type in relative
69. 3:05strength index, click it, and add it to
70. 3:07your chart. These are default settings.
71. 3:09Nothing has been changed. Now, just to
72. 3:11show you a quick example, the price
73. 3:13right here has been going up. The RSI
74. 3:16went up and then started to go down
75. 3:18before the price started to go down.
76. 3:20This is a divergence. I've been doing
77. 3:22that for years, so my eyeballs can spot
78. 3:24it immediately. But I have a way simpler
79. 3:27solution for you guys, and this is my
80. 3:29secret sauce. forget about the price
81. 3:32chart and just doubleclick the RSI to
82. 3:35make it full screen. All you're looking
83. 3:37for is for the RSI to leave the range
84. 3:39and then come back into the range. So,
85. 3:41we left the range right here and we
86. 3:43started to trade within the range right
87. 3:45here. So, I'm going to circle this. We
88. 3:47stayed within the range right here. We
89. 3:49left the range right here and then came
90. 3:51back in. So, I'm going to circle this.
91. 3:53We left the range, came back in the
92. 3:55range. We left the range, came back in
93. 3:58the range. I'm looking at these little
94. 4:00peaks after it left the range. Outside
95. 4:03of the 70 range, inside of the 70 range,
96. 4:07outside of the 30 range, inside of the
97. 4:1030 range, 70 on the top, 30 on the
98. 4:13bottom. And you can just keep circling
99. 4:15all of these first points where it was
100. 4:18trading within the range after it left
101. 4:19the range. Outside, inside. It's super
102. 4:23simple. Now, this next part is probably
103. 4:25going to blow your brain whole. Take
104. 4:27your vertical line tool and place a
105. 4:29vertical line on every single one of
106. 4:32these areas that you circled. We're not
107. 4:34even looking for divergences at this
108. 4:36point. We are simply looking at the RSI
109. 4:39trading within the range after it's left
110. 4:41the range. And the reason behind this is
111. 4:43because the price was overbought and
112. 4:46then stopped being overbought and went
113. 4:48into the normal range. And usually when
114. 4:50it goes back into the normal range, it's
115. 4:52likely to go to the other side. Because
116. 4:54this is an oscillating momentum
117. 4:56indicator, it oscillates from one end to
118. 4:58the other. So not even looking for
119. 5:00divergences. These are the points that
120. 5:02I've marked up. As it's left the range
121. 5:05and come back in the range and made a
122. 5:06little peak. Now double click the RSI.
123. 5:08You'll get your price back up. And as
124. 5:10you can see here, you take a long
125. 5:12position. Here you take a short
126. 5:14position. Here you take a long position.
127. 5:17Here you take a short position. As you
128. 5:19can see here, you take a short position,
129. 5:22long position, short position. I'm not
130. 5:24even adjusting these tools. I'm just
131. 5:26putting the position tool. So, just from
132. 5:28these that I marked up, we have a win, a
133. 5:31win, a win, a loss, but it went in our
134. 5:34direction. A win, a loss, a win, a win,
135. 5:38a win. You don't even have to look for
136. 5:40divergences even though they were here
137. 5:4390% of the time. Price was going down,
138. 5:46RSI was going up. Price was going up,
139. 5:49RSI was going down. Price was going
140. 5:51down, RSI was going up. These are simply
141. 5:55divergences to show you that the
142. 5:56momentum was being lost. And all you
143. 5:59need to do is wait. Be patient. Please
144. 6:02wait for the price to leave the 7030
145. 6:04range. Wait for it to start coming back
146. 6:06in. Then look for those little peaks and
147. 6:09tops and then get in there. Look left
148. 6:12for your market structure. Put your stop
149. 6:14loss below the previous swing and you
150. 6:16will make money like 80% of the time.
151. 6:20Back test it a 100 times if you want.
152. 6:22This is not a 100% win rate strategy,
153. 6:26but it is crazy effective. It's been my
154. 6:29goto since day one of day trading. Now,
155. 6:32this is just a bonus tip, but if you
156. 6:34want to help with these entries, all you
157. 6:37got to do is add the easy exit
158. 6:39indicator. And if you've already marked
159. 6:41up your chart and you've gotten into
160. 6:42your trade and you see one of these
161. 6:44little dots by your entry, you know
162. 6:47you're pretty much safe to let that ride
163. 6:49out. They don't pop up all the time, but
164. 6:51it's a good indication to tell you when
165. 6:52the markets are done with that swing up.
166. 6:55These are actually exit points. So, if
167. 6:57you were in a long position here, this
168. 6:59would be your exit point. Yellow is a
169. 7:01weak exit, orange is a medium exit, and
170. 7:04red is a GTFO exit. If this video helped
171. 7:08simplify the RSI for you, let me know in
172. 7:10the comment section down below. And I
173. 7:12will see you in the next video.